Interview with Ivan Büchi, Manager of Digital Banking Platforms
The financial sector is under a lot of pressure to deal with digitalisation adequately. Ivan Büchi, Manager of Digital Banking Platforms at Swisscom Enterprise Customers, identifies five options for how Swiss banks can respond to the challenges.
Text: Hansjörg Honegger, Images: Daniel Brühlmann, 19 December 2017
Are Swiss banks ready for digitalisation?
Yes and no. They’re actually right in the middle of the process, but we are still seeing predominantly traditional business models, with no attempts to try out new digital business models. And very little has happened at the customer-bank interface. Take e-banking, for example – basically, it can do nothing that it wasn’t already doing in 1996.
There’s still mobile banking, at least.
Sure, I can use a mobile device to make payments, issue stock exchange orders and query my balances. But this is not nearly enough to differentiate yourself, or to refer to this as a digitalisation strategy.
As you see it, what is needed for a true digitalisation of the banks?
Digitalisation should empower the customers in the broadest possible variety of business areas. Empowering expressly refers not just to operative aspects (self-service), but also to the knowledge and decision-making levels. Additionally, we have to leave traditional business models behind, and be open to these new opportunities in order to develop future-oriented business models.
Ivan Büchi has spent the last few years working at financial companies in the banking and insurance sectors, at software companies and at an Internet start-up. Up until the end of July 2017, he was the Manager of the Digital Office at the Glarner Kantonalbank. He worked with an innovative team on making access to financial solutions simpler and more convenient. He now works as the Head of Digital Banking Platforms at Swisscom and is driving the digitalisation in the financial industry with products such as the eVoja consulting tool, digital identification and signature, and many other exciting ideas.
And internally at the banks?
Within the bank, digitalisation traditionally means process optimisation and automation. However, digitalisation in banks must now direct a stronger focus on supporting and empowering bank employees. This, for example, when it comes to data analysis, the monitoring of compliance rules, and, in general, carrying out work steps that create no value. In this case, it is very important not to just map the old processes digitally, but to consistently examine the procedures as a whole and think about whether the way in which they are performed still makes sense today.
Are we talking about artificial intelligence?
More about rule-based systems. Artificial intelligence is still quite a long way off.
The Swisscom white paper “Digitalisation: Quick decisions are needed” makes many references to China and shows examples of how the financial sector is evolving there. Is China really a blueprint for Switzerland?
No. But China very impressively illustrates how quickly a development driven by digitalisation can progress within the financial sector. For example, within four years of its launch, the fund maintained by Ant Financials (Alibaba) has already grown to more than USD 160 billion in value. And the Chinese are also showing us where Europe might be headed when it comes to payments. For example, mobile payment has reached a completely different level in China to over here. There, over 40% of payments in online trade are cashless, and the exciting, or worrying aspect, for banks is that over 90% of these cashless payments are made using Alibaba’s Alipay and Tencent’s TenPay, and without the involvement of the traditional banks.
In what ways do we differ from China?
Digitalisation provides many Chinese with easy access to financial services. The catalyst for this is not only by the digital affinity of the Chinese, but also the fact that Chinese companies and banks can scale their activities at a high level due to the large domestic market.
In the white paper mentioned beforehand, you show five optional courses of action for the digitalisation of the banks. The first option is to do nothing. Are you being serious?
There are companies that choose to do nothing. They concentrate on their niche and the existing customer base that doesn’t want anything to change. We’re not putting a value on this option, it’s simply there.
Who would be better to do nothing?
No-one. And a bank that does nothing at all will remain the exception. You now often hear that someone is observing how the market develops before acting. But this isn’t really an option. You should definitely become active, even if you are only taking small steps. Even these small steps can help us to learn and gain knowledge for future projects.
«Digitalisation in banks must now direct a stronger focus on supporting and empowering bank employees.»
Does an app amount to acting, or is it still waiting?
It depends what the app can do. However, mobile banking is now a hygiene factor and not a step towards digitalisation.
The second option for a bank is the infrastructure option. The idea is that banks provide infrastructure for other banks. But today, it’s utterly illusory to contemplate collaborating like this.
Not at all. There are already some interesting approaches being taken. For example, the Hypothekarbank Lenzburg or the Glarner Kantonalbank, both also operate, albeit in different contexts their own solutions for other banks. On the stock exchange, this model has actually become quite well established, because direct access to the stock exchange is still very cost-intensive.
The white paper recommends that banks can also become aggregators. What does this mean?
The financial sector offers an extremely wide spectrum of products and services. And the variety that this range of products offers is also growing fast due to digitalisation. There are financial institutions for which, due to their size, it makes no sense to offer an exhaustive, and usually cost-intensive, range of products of their own. As aggregators, these institutions can focus on just a few individual products and, at the least, give their customers access to all other products. Option three, the boutique bank, is in the same vein. It concentrates on a few core services with specialized consultants, while the remaining products and services are purchased or embedded.
To do this, banks have to open the interfaces to the products and services.
This is what PSD2 (Payment Services Directive) aims to do. This directive must be implemented as national law within the EU by the start of 2018. It forces banks to open interfaces to their systems for third parties (known as third-party payment service providers). This enables aggregators to enhance their own services with those of other banks. Of course, this is a good opportunity to consolidate your own product range and save costs, while also thinking about enhancements involving third-party products and services that provides customer benefits.
What effect will PSD2 have in Switzerland?
There is no obligation for banks here to implement the PSD2 Directives issued by the EU, and based on the position taken by the Bankers Association, it doesn’t look as if there will be a similar, but voluntary, implementation in Switzerland at the same time.
The last option for the digital transformation proposed by Swisscom for banks is the platform. A trend that is also being hotly discussed in other industries. What would this look like in the case of a bank?
This is an aggregation of options two, three and four: infrastructure, aggregator and boutique bank. The platform bank only offers consulting, with the rest being in the Cloud or at other banks; the bank can also offer its own products and services on other platforms.
Does a platform have a chance in Switzerland?
Certainly not today or tomorrow, but I could definitely imagine it over the medium term. This solution allows you to share the high costs and extend your sales reach by means of other platforms. Two strong selling points.
«Unfortunately, the cultural transformation is often forgotten in digitalisation projects.»
No matter what option a bank chooses for its path to digitalisation, it has to start changing ...
… unless it chooses option 1…
… which, as we have seen, is not really an option at all. Are the banks – traditionally part of a more conservative environment – capable of processing this culturally?
Unfortunately, the cultural transformation is often forgotten in digitalisation projects. It’s not just about the digitalisation of the customer experiences, the processes and the products, but also about the employees who are behind them all. The important thing is for management to show transparently and comprehensibly where the company is headed, and how the journey is going to change the responsibilities of the individual employees. At the beginning of any change like this, initiating a cultural project that addresses and clarifies these topics is recommended, in order to counteract any fears that may arise.
Are the customers also being brought along on this journey?
This depends on the bank and its respective digitalisation strategy. There is no magic formula. If the strategy results in relevant customer benefits, then you can assume that the customers will automatically accept the products and services offered.
«If the strategy results in relevant customer benefits, then you can assume that the customers will automatically accept the products and services offered.»
Okay, and how do you find the right strategy?
Each company has to find its own way based on its individual starting situation. However, there are specialists who can help. For example, Swisscom is very closely observing the financial sector worldwide with its e-foresight think tank, following the trends and developments in the industry, as well as the start-ups. This is the basis we use to advise banks that are looking for support with strategy topics.
The white paper that we’ve now mentioned several times uses the word “fast” quite a lot. What time frame does “fast” refer to?
Fast no longer has the same meaning that it did 20 or 30 years ago. These days, the world changes significantly more in five years than it did back then. The times in which management defined a 5-year strategy and then implemented it meticulously are definitely over. When the prerequisites or the customer requirements change, we now have to be able to react flexibly, with agility – and fast.
The “do nothing” option
The old business model was successful – why change?
The infrastructure option
The bank leases out the infrastructure that it has built up over decades to fintechs, career changers, social networks or former competitors.
The aggregator option
The bank concentrates on a very few core services and procures the rest from others.
The boutique option
The bank concentrates on a very few core services and procures the rest from others.
The marketplace option
A combination of the aggregator and infrastructure options.
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